Money does buy happiness – if you're richer than your friends

'Money can't buy you happiness but it does bring you a more pleasant form of misery' — Spike Milligan. Photo: Getty Images

Being more wealthy than your peers can buy more happiness than the actual amount you take home, a new study shows.

Researchers at Warwick Business School and City University in London found people who earned more than others in their reference group — those of the same age, gender, religion, or nationality — were more likely to feel happy with their life.

This was particularly true for people who live in countries with greater income inequality like China and the United States, where the top 1% of earners commanded the largest share of total income.

Those whose income ranked higher than others of the same age, gender, or religion, were more likely to report feeling happy, excited, or smiling the previous day. They were also less likely to have reported feeling stressed, sad, or angry.

However, the effect on well-being of moving up or down the income rank is greater for those living in places where the gap between the rich and the poor is wider.

“Earning more than others may improve an individual’s sense of well-being more in places where inequality is rife, but it also means that they are likely to suffer more psychologically if they move down the income rankings,” Powdthavee explained.